Veteran grower assessing profit prospects

The latest USDA/NASS walnut production forecast for California is 415,000 tons, down 5 percent from last year’s 436,000 ton crop — but veteran walnut grower Ronald Martella, would like it to be even lower, more in the 385,000 ton to 400,000ton range.

“That would be a good marketable crop,” says the Hughson, Calif., grower who is president of Ronald Martella Farms, Inc., a family operation which grows 700 acres of walnut and another 700 acres of almonds in Stanislaus County. He is also a partner with son, Aaron Martella, and sons-in-law, Kevin Chiesa and Lucio Salazar in Grower Direct Nut Company, which processes and markets Martella Farms walnuts and those for other producers.

Last year’s big crop, combined with the sharp worldwide economic downturn, created problems moving all the nuts. As a result, prices growers received plummeted to about half what they were for the short 2007 crop.

A 2009 crop of 400,000 tons or a bit less, he reasons, might have boosted prices 20 percent to 25 percent above last year’s levels. “Even with this high estimate, there is still a strong demand for walnuts. We think that we can market them at prices that will be reasonable for both the growers and the buyers,” he says.

The large ‘08 crop had an upside, Martella notes. “Prices fell to the point where buyers in China, South Korea and the Middle East bought a lot of nuts — much more than in previous years. It relieved us of the excess tonnage.

“That also enabled them to see the quality of our product and to expand walnut markets. Hopefully, that will carry over to this year’s crop.”

When crews start harvesting this year’s walnuts about Sept. 20, Martella expects them to bring in a crop 10 percent to 20 percent smaller than last year’s unusually large harvest. This includes one 400-acre block of walnuts where about 30 percent of the trees suffered damage from the March frost.

Nevertheless, Martella is pleased with the way his walnuts, mostly Chandler, Howard and Tulare, have developed this year. “We had a nice, mild summer and the quality is looking really good now, with a lot of lighter nuts, which the Europeans like,” he says.

Over the years, changes in cultural practices have enabled Martella to keep pace with rising production costs. At one time, for example, he planted walnut trees 40 to 60 feet apart, as was customary with older varieties. Ten years ago he began planting newer, faster growing varieties, which don’t grow as large, on a 24 x 12-foot grid pattern. This enables him to get three times as many trees per acre compared to a 40 x 40-foot pattern.

“One key to controlling costs is to get into full production quickly,” Martella says. “These newer varieties begin producing a fair amount of walnuts at four years of age and reach full production two years later. They also produce more nuts at maturity.

“In the old days, if we got 2,000 to 3,000 pounds of walnuts per acre, we were really doing well. Last year, we harvested 8,000 to 9,000 pounds per acre. So, despite the low prices in 2008, with the higher production of the new orchards it wasn’t a financial disaster for us.”

With the switch to closer spacing of the trees, Martella has also gone to mechanical hedging, which has cut pruning costs by a third compared to hand pruning the older varieties.

As with other growers, last year’s large harvest forced them to find offsite locations for storing the extra nuts. Because of the slower economy, there was a readily available supply of storage space in vacant industrial buildings at reasonable prices.

“Had the economy been booming, though, that space wouldn’t have been available, and we would have had to stockpile nuts in our yard,” he says.

To eliminate hauling and storage costs and loss of control over the nuts in offsite storage, he added another 30,000 square feet to his own storage facilities this year.

Also this year, Martella took advantage of federal tax credits and an attractive rebate program offered by his local irrigation district to install a 500,000-watt solar system to provide 80 percent of the electrical needs of his shelling plant.

The irrigation district will rebate the amount of money he pays to buy power that equals one-third of the cost to build and install the solar power system. During the day, when the plant is operating, the solar-generated electricity goes directly into the plant. On weekends, when the plant is shut down, the solar power goes to the district.

“We expect this solar power system will pay for itself in eight years,” Martella says. “Then, our electricity costs will be very low.”